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Back to lay arbitrage betting strategy

A back to lay arbitrage betting strategy is the most common form of sports arbitrage and consists of backing with the bookmaker and laying the same outcome with a betting exchange to guarantee a profit. Learn what a back to lay arbitrage betting strategy is and how to calculate it.

Arbitrage betting is a strategy where bettors place bets on all outcomes of an event at odds that guarantee a profit irrespective of the outcome.

For example, the odds implied probabilities on a fair market would add up to 100% based on how likely an outcome can occur - bookmakers, however, price their market odds to go above a 100% probability, therefore giving them an edge - learn how bookmakers work.

Arbitrage betting puts the odds in the bettor’s favour by ensuring they cover all eventual outcomes across betting providers and add up to less than 100%.

Arbitrage and betting exchanges

Traditionally arbitrage betting has been done between two or more bookmakers. However, the introduction of betting exchanges like Smarkets - understand what a betting exchange is - has opened up a new range of arbitrage possibilities.

By giving the bettor the possibility to bet against a result - laying the outcome - they can now cover all the possible outcomes with only two bets - one back bet and one lay bet.

What is a back to lay arbitrage betting strategy?

The back to lay arbitrage betting strategy is now the most common method of sports betting arbitrage and consists of two bets between a bookmaker and a betting exchange.

This strategy allows bettors to back with a bookmaker and then lay the same outcome on a betting exchange for a profit.

Arbitrage opportunities arise when the lay price on the betting exchange is shorter than the back odds on another exchange or bookmaker. If done correctly these bets will cover all outcomes of an event, so you lock in a profit regardless of the result.

How to calculate a back to lay arbitrage bet

Now you understand what a back to lay arbitrage bet is, using an example we will explain exactly how to calculate it.

In horse racing, markets on the betting exchange are known to be volatile shortly before the start, with some horses odds rapidly shortening. These are called steamers and create the perfect opportunity for a back to lay arbitrage opportunity - as bookmakers can be slow to react to the odds movement.

For this example; let’s say you have seen a horse shorten dramatically on the Smarkets exchange five minutes before the off, but a bookmaker hasn’t reacted to the news. The back and lay odds are displayed below:

Bookmaker (back odds)

Betting exchange (lay odds)

Odds

9.00

8.00

This is clearly an arbitrage opportunity as the lay price with the exchange is shorter than the back price with the bookmaker. But how much do you need to stake with the betting exchange if you back £500 on the horse to win with the bookmaker?

How to calculate your lay stake for back to lay arbitrage bets

To calculate your lay stake on the Smarkets exchange you simply use the following calculation:

(back price x back stake) / (current lay odds - exchange commission)

Example: (9.00 * 500) / (8.00 - 0.02) = £563.91

You would then make a £563.91 lay bet on the horse not to win at odds of 8.00 on the betting exchange.

How to calculate your profit if your arb wins at the bookmaker

Calculating your profit if your bet wins with the bookmaker is very simple:

Profit = (back odds – 1) * back stake – (lay odds -1) * lay stake

Example: Profit = (9.0 - 1) * 500 - (8.0 -1) * 563.91 = £52.63

How to calculate profit if your arb wins on the exchange:

Next, you calculate your profit if your lay bet with the exchange is successful:

Profit = (lay stake * (1 - commission)) - bookmaker stake

Example: Profit = (563.91 * (1 - 0.02)) -500 = £52.63

How to calculate your overall back to lay arbitrage profit

Regardless of the outcome, your overall back to lay arbitrage profit would be £52.63 on both the bookmaker and the betting exchange.

Apply this to betting

Now you understand what back to lay arbitrage betting is and how to calculate it you have the tools to be able to take advantage of price discrepancies between bookmakers and betting exchanges.